Knowing funds..........

A mutual fund is a trust that pools together the savings of a number of investors who share a common financial goal. All such investors buy units in a fund that best suit their risk appetite. Purpose can be anything- be it growth in capital, regular returns or safety of capital. The fund manager then invests this pool of money in securities, ranging from shares to debentures to money market instruments or a mixture of equity and debt, depending on the objective of the scheme.

Debt funds invest in company debentures and bonds, Government securities and money market instruments। Relative to equity funds; debt funds offer safest investment alternative for your hard-earned money. At the same time the expected returns from debt funds would be lower. In fact, both internationally and in India, mutual funds manage more money in debt schemes than in equity schemes!

Gilt funds are again debt funds, which invest only in government securities and hence have zero credit risk. However it does involve interest rate risk.

Liquid funds are debt funds, which invest in short term papers, with maturities usually not exceeding 180 days and hence are safe from interest rate risk.

Equity funds invest predominantly in the stock markets and attempt to provide investors the opportunity to benefit from the higher returns which stock markets can provide. As these are most risky of all mutual funds on palette, investors need to be highly choosy while going for them.

Balanced funds invest in a mix of equity and debt investments. Hence, they are less risky than equity funds, but at the same time provide commensurately lower returns than equity funds (more than what deft funds can offer).

Market has its upsides and downturns!!

The dynamics of investing in assured return schemes and market-linked avenues are as similar as chalk and cheese. Always invest in line with your risk appetite irrespective of the market conditions. Your risk appetite remains unchanged regardless of how the markets are placed (whether the markets r experiencing a bull run or otherwise).

Saving bank accounts will go off

Everyone thinks of investing, but few consider optimizing their investments by utilising the various options at their disposal. ‘Market returns generated by an investment avenue are a factor of the risk borne.’ is much touted sentence of their economic know-how.

For too many investors, saving money means putting their hard-earned income in a savings bank account. A notion of ‘money working hard for you’ never finds place in their brain. All investments are then routed through this savings account. Moreover they have an edge over other silly people on a shopping spree wasting bucks inconsiderately.

Unlike assured return schemes (like fixed deposits and NSC); wherein the investor’s capital is protected and returns assured investors in market-linked avenues run the risk of losing their capital. But when you consider the pittance investors make on their savings account (currently 3.50% per annually= Bank offered rate minus the inflation) it is surprising that this ‘standard practice’ still finds countrywide acceptance. And given the current upward trend in the soaring inflation rate of 6.74% noticed currently, earning on savings account may go poorer!!!

Hope We Indians look at the way to break from the standard practice of investing through banal assured return schemes (Bank saving account) to a more lucrative investment option. Mutual funds are replacing the traditional avenues of investments like stocks, bonds, fixed deposits and even gold (with the launch of gold exchange-traded funds) and real estate (with the launch of real estate investment trusts). In no time saving bank accounts will go off for sure. At least hope so for betterment of educated Indians. Cheers!!!

WE MIDDLE CLASS PEOPLE ALWAYS LIKED SAVING!!

We put aside small amount of money regularly from salary (as if we r asked by god). Money gets invested in a low risk, low return vehicle such as money market checking account, savings account or certification of deposit. If we have individual retirement account (IRA), we have it with a bank!!

We save to consume rather than to invest (like car, vacations, plasma screen TVs). We believe in paying in cash and pretty afraid of credit and debt. Instead we like security offered by bank's saving account. Whole life insurance policies are most welcome as we love the feeling of security.

We love to say, "A penny saved is a penny earned." It is good to have some savings. You should hold in cash at least one year's worth of expenses. but there are far better and safer investment vehicles than money in bank...............................

Started investing! Thank god n thank u too!!

There is one class of people in an investing society you would never like to be a part of---‘BORROWERS’. Borrowers do solve their financial problems easily because banks love them! Even they invest with borrowed money u know!! Their idea of financial planning is robbing Vikram to pay Manish.

They are never cautious about money and their spending habits. Spreading Debt over a long period of time is smart for them. They say themselves: “I want the kids to have what I never had.” Or “Low EMI! Fantastic!!”



They use credit cards impulsively for doodads such as vacations, cars, swimming pools, World-cup cricket tours and roll that debt into a long term home-equity loan so that they can clean up their credit cards and then start charging again. If value of their home goes up, they borrow on equity again, or buy a larger and more expensive home!!! They believe that real estate prices never go down.

These investors often look rich having big houses and flashy cars but if u check they buy on borrowed money. They may also make lot of money but they are just one financial accident away from financial ruin………………………….
More money won’t solve problem but our controlled money habits can for sure.